Research shows that now more than a third of homeowners with mortgages would consider a 10-year fixed remortgage product.
If the idea of such a long fix sounds daunting, read on. You might change your mind – particularly if you’re settled and pretty sure of staying put over the next decade.
Over recent years, two-year mortgage and remortgage deals have been the most popular buy for homeowners. But this is changing. “With the historically low interest rates rising, there has been a gradual shift towards longer fixes,” explains Moneysavingexpert.com.
The data indicates that mortgages with fixed rates were the most popular deals at the end of 2018. They won more interest from borrowers in December than in previous months too.
Interest in tracker mortgages, on the other hand, has been minimal. The survey showed that trackers accounted for only 6% of searches in the last three months of 2018.
Would You Fix Your Remortgage for 10 Years?
Data provider Moneyfacts says the availability of 10-year fixed-rate deals on the market has soared too. Three years ago, there were just eight products up for grabs. Today, there are more than 120. The average interest rate on such deals has plunged too.
The bigger high street lenders are offering a small range of 10-year fixed rate products. It is the smaller banks, building societies and lenders who have seen the value of offering longer-term remortgages.
The last couple of years have seen the emergence of historically super-cheap mortgage rates. Two- and three- and even five-year deals fixed at below 2% have become commonplace. The long-term security of the ten-year fix is slightly more expensive. But it is possible to secure a deal at below 3% with a 60% loan to value (LTV) with some lenders.
Every time you remortgage your property, there are costs involved. Fees have increased over the last decade as lenders have sought to claw back their losses due to low interest rates. These can add considerably to the cost of your remortgage. These typically include the cost of the deeds release fee, valuation cost, arrangement and reservation fee. If you fix for ten years, you only have to shell out for this once.
With a long-term fix, you’ll know exactly what your mortgage will cost – long-term. Your monthly payments will not increase over the life of the fix, no matter how high interest rates go. They are currently at 0.75%, the highest since 2009. Bank of England Mark Carney has said there would be further gradual rate rises to come.
The steadiness a fixed rate offers can be a good way to buffer the other bumps in your income you know you have ahead. Perhaps your children are about to start university. Perhaps you are heading into retirement.
The main concerns of homeowners with the global economy are Brexit and Trump. There are a lot of unknowns ahead, both domestically, with the UK’s future relationship with Europe, and globally. Many experts, including the IMF, are predicting a global downturn in the coming years. With a ten-year fix, you’ll be able to ride any turbulent interest rate changes unaffected.
6. LTV Advantage
A housing slump is underway in the UK. Asking prices for homes coming on to the market in the UK in December were nearly £10,000 lower than they were in October. The property market is said to be approaching its worst annual performance in almost a decade. If this continues, it will affect your borrowing power. This is because the lower your LTV (loan-to-value), the better remortgaging deal you can get. But if your home is valued less in the next couple of years or so due to the market, you’ll get a worse deal.
Is a 10-Year Remortgage Fix for You?
Of course, these types of mortgage don’t suit everyone. There are pros and cons that go with choosing a long-term fixed rate remortgage. If your circumstances change suddenly, and you need to exit, you will pay a penalty.
It can be best to consult a mortgage broker before making the best decision for your situation.
Taking out a ten-year fix remortgage might seem like a gamble. After all, no one has a crystal ball as to what interest rates will be in 2029. No one can predict exactly how the UK and global economy will be performing. No one can state firmly the impact on the value of your property.
But given the current levels of uncertainty on all these fronts, right now, a 10-year fix could be a sensible gamble. One that may pay dividends in stability and security.
If you need help in finding the right remortgaging product for you, we’ll be happy to help you here.